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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
PHILIP MORRIS COMPANIES INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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[LOGO]
PHILIP MORRIS
COMPANIES INC.
GEOFFREY C. BIBLE 120 PARK AVENUE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER NEW YORK, NY 10017
March 19, 1998
DEAR STOCKHOLDER:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders of
Philip Morris Companies Inc. The meeting will be held at 9:00 a.m. on Thursday,
April 30, 1998, at the Philip Morris Manufacturing Center, 3601 Commerce Road,
Richmond, Virginia.
At the meeting, we will elect 14 directors and act upon the selection of
auditors. If presented, we will also vote on two stockholder proposals. There
will also be a report on the Company's business, and stockholders will have an
opportunity to ask questions.
We anticipate that a large number of stockholders will attend the meeting. As
seating is limited, we suggest you arrive by 8:30 a.m., when the auditorium will
be opened. If the auditorium is filled, there will be additional seating outside
the auditorium from which the proceedings may be viewed. Those needing special
assistance at the meeting are requested to write the Corporate Secretary at 120
Park Avenue, New York, New York 10017. IF YOU ARE A REGISTERED STOCKHOLDER AND
PLAN TO ATTEND THE MEETING, PLEASE DETACH AND RETAIN THE ADMISSION TICKET THAT
IS ATTACHED TO THE PROXY CARD. IF YOUR SHARES ARE HELD IN THE NAME OF A BROKER
OR OTHER NOMINEE AND YOU DO NOT HAVE AN ADMISSION TICKET, PLEASE BRING PROOF OF
YOUR SHARE OWNERSHIP TO THE MEETING.
The vote of each stockholder is important. You can vote by signing, dating and
returning the enclosed proxy card. Also, this year registered stockholders may
vote for the first time by telephone or over the Internet. Instructions for
using these convenient new services are set forth on the proxy card. I urge you
to vote your proxy as soon as possible. In this way, you can be sure your shares
will be voted at the meeting, and you will spare your Company the expense of a
follow-up mailing.
Sincerely,
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<CAPTION>
/s/ Geoffrey C. Bible
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FOR FURTHER INFORMATION ABOUT THE ANNUAL MEETING,
PLEASE CALL 1-800-367-5415
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PHILIP MORRIS COMPANIES INC.
120 Park Avenue
New York, New York 10017
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, APRIL 30, 1998
To the Stockholders of
PHILIP MORRIS COMPANIES INC.:
The Annual Meeting of Stockholders of Philip Morris Companies Inc. will be held
on Thursday, April 30, 1998, at the Philip Morris Manufacturing Center, 3601
Commerce Road, Richmond, Virginia, at 9:00 a.m. to:
(1) Elect 14 directors;
(2) Ratify the selection of auditors for the fiscal year ending December 31,
1998;
(3) Vote on two stockholder proposals if presented by their proponents; and
(4) Transact such other business as may properly come before the meeting.
Only holders of record of Common Stock at the close of business on March 9,
1998, will be entitled to vote at the meeting.
G. Penn Holsenbeck
VICE PRESIDENT AND SECRETARY
March 19, 1998
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.
PROXY STATEMENT
SOLICITATION OF PROXIES
This proxy statement is furnished by the Board of Directors (the "Board") of
Philip Morris Companies Inc., 120 Park Avenue, New York, New York 10017, in
connection with its solicitation of proxies for use at the Annual Meeting of
Stockholders to be held on Thursday, April 30, 1998, at 9:00 a.m., at the Philip
Morris Manufacturing Center, 3601 Commerce Road, Richmond, Virginia, and at any
and all adjournments thereof. Mailing of the proxy statement will commence on or
about March 19, 1998. Holders of record of the Company's Common Stock (the
"Common Stock") at the close of business on March 9, 1998, will be entitled to
one vote for each share held on all matters to come before the meeting. On
February 27, 1998, there were outstanding 2,427,948,291 shares of Common Stock.
Stockholders are urged to sign and date the enclosed proxy and return it as
promptly as possible in the envelope enclosed for that purpose. This year,
registered stockholders can also deliver proxies by calling a toll-free
telephone number or by using the Internet. The telephone and Internet voting
procedures are designed to authenticate stockholders' identities, to allow
stockholders to give their voting instructions and to confirm that stockholders'
instructions have been recorded properly. Instructions for voting by telephone
or over the Internet are set forth on the enclosed proxy card.
A proxy may be revoked at any time before it has been voted at the meeting by
submitting a later dated proxy (including a proxy by telephone or over the
Internet) or by giving written notice to the Secretary of the Company. Unless
the proxy is revoked or there is a direction to abstain on one or more
proposals, it will be voted on each proposal and, if a choice is made with
respect to any matter to be acted upon, in accordance with such choice. If no
choice is specified, the proxy will be voted as recommended by the Board. The
proxy will also serve to instruct the administrator of the Company's dividend
reinvestment and voluntary cash payment plan and the trustee of each defined
contribution plan sponsored by the Company how to vote the plan shares of a
participating stockholder or employee.
VOTING AT THE MEETING
A majority of the votes entitled to be cast on matters to be considered at the
meeting constitutes a quorum. If a share is represented for any purpose at the
meeting, it is deemed to be present for all other matters. Abstentions and
shares held of record by a broker or its nominee ("Broker Shares") that are
voted on any matter are included in determining the number of votes present.
Broker Shares that are not voted on any matter at the meeting will not be
included in determining whether a quorum is present.
The election of each nominee for director requires a plurality of the votes
cast. In order to be approved, the votes cast for the selection of auditors and
for each stockholder proposal must exceed the votes cast against such matters.
Abstentions and Broker Shares that are not voted on the matter will not be
included in determining the number of votes cast.
Stockholders' proxies are received by the Company's independent proxy processing
agent, and the vote is certified by independent inspectors of election. Proxies
and ballots that identify the vote of individual stockholders will be kept
confidential, except as necessary to meet legal requirements, in cases where
stockholders write comments on their proxy cards or in a contested proxy
solicitation. During the proxy solicitation period, the Company will receive
vote tallies from time to time from the inspectors, but such tallies will
provide aggregate figures rather than names of stockholders. The independent
inspectors will notify the Company if a stockholder has failed to vote so that
he or she may be reminded and requested to do so.
------------------------
As used herein, the term "Company" or "Philip Morris" includes Philip Morris
Companies Inc. from July 1, 1985, and Philip Morris Incorporated prior to July
1, 1985, and, where appropriate, their subsidiaries.
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ELECTION OF DIRECTORS
GENERAL INFORMATION
The Board has responsibility for establishing broad corporate policies and for
the overall performance of the Company, although it is not involved in
day-to-day operations. Members of the Board are kept informed of the Company's
businesses by various reports and documents sent to them each month, as well as
by operating and financial reports made at Board and committee meetings by the
chairman of the board and other officers. In addition, the Board holds an annual
two- or three-day meeting to review the Company's Five-Year Plan.
Regular meetings of the Board are held each month, except March, July and
October, and special meetings are held when necessary. The organizational
meeting follows immediately after the Annual Meeting of Stockholders. The Board
held 11 meetings in 1997.
------------------------
COMMITTEES OF THE BOARD
Various committees of the Board have been established to assist it in the
discharge of its responsibilities. Those committees are described below. The
biographical information on the nominees for director set forth in this proxy
statement includes committee memberships currently held by each nominee.
The AUDIT COMMITTEE meets with management, the Company's independent accountants
and its internal auditors to consider the adequacy of the Company's internal
controls and other financial reporting matters. The Audit Committee recommends
to the Board the engagement of the Company's independent accountants, discusses
with the independent accountants their audit procedures, including the proposed
scope of the audit, the audit results and the accompanying management letters
and, in connection with determining their independence, reviews the services
performed by the independent accountants. This committee, which also monitors
compliance with the Company's Business Conduct Policy, consists of six
non-employee directors and met six times in 1997.
The COMMITTEE ON PUBLIC AFFAIRS AND SOCIAL RESPONSIBILITY reviews and monitors
the Company's policies, practices and programs with respect to public issues of
importance to stockholders, the Company and the general public, to the extent
those matters are not the responsibility of other committees of the Board. This
committee consists of nine directors and met four times in 1997.
The COMPENSATION COMMITTEE is responsible for administering the Company's
compensation programs and remuneration arrangements for its highest-paid
executives, including the chief executive officer, and for reviewing the
succession plan for the chief executive officer and other senior executives. The
Committee's Report on Executive Compensation appears elsewhere in this proxy
statement. The Compensation Committee consists of five non-employee directors
and met six times in 1997.
The CORPORATE EMPLOYEE PLANS INVESTMENT COMMITTEE, consisting of six directors
and one senior executive, held three meetings in 1997. This committee oversees
the investment of certain employee benefit plan assets.
The EXECUTIVE COMMITTEE, consisting of six directors, has authority to act for
the Board on most matters during intervals between Board meetings. This
committee did not meet in 1997.
The FINANCE COMMITTEE consists of seven directors and one senior executive and
met four times in 1997. It monitors the financial condition of the Company and
advises the Board with respect to financing needs, dividend policy, share
repurchase programs and other financial matters.
The NOMINATING AND CORPORATE GOVERNANCE COMMITTEE consists of eight non-employee
directors and met three times in 1997. This committee reviews the qualifications
of candidates for director suggested by Board members, management, stockholders
and other sources, considers the performance of incumbent directors in
determining whether to nominate them for reelection and recommends to the Board
a slate of nominees for election as directors. It advises the Board on all
matters concerning
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corporate governance, to the extent these matters are not the responsibility of
other committees, assesses the Board's performance and makes recommendations to
the Board on the retirement policies for non-employee directors, the functions
and duties of the committees of the Board, general Board practices and the
Company's relations with its stockholders.
------------------------
THE NOMINEES
It is proposed that 14 directors be elected to hold office until the next Annual
Meeting of Stockholders and until their successors have been elected. The
Nominating and Corporate Governance Committee has recommended to the Board and
the Board has approved the persons named below as management's nominees and,
unless otherwise marked, a proxy will be voted for such persons. Each of the
nominees currently serves as a director and was elected by the stockholders at
the 1997 Annual Meeting, except for Carlos Slim Helu, who was elected to the
Board in August 1997, and Lucio A. Noto, who was elected to the Board in January
1998. All nominees who served during 1997 attended at least 75% of the aggregate
number of meetings of the Board and all committees of the Board on which they
served, except for Mr. Slim, due to illness.
Although management does not anticipate that any of the persons named below will
be unable or unwilling to stand for election, a proxy, in the event of such an
occurrence, may be voted for a substitute designated by the Board. However, in
lieu of designating a substitute, the Board may amend the By-Laws to reduce the
number of directors.
<TABLE>
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ELIZABETH E. BAILEY Dr. Bailey assumed her present position in July 1991, having
[PHOTO] served from July 1990 to June 1991 as a professor of industrial
John C. Hower Professor of administration at Carnegie-Mellon University and as a visiting
Public Policy & Management, scholar at the Yale School of Organization and Management. From
The Wharton School of the 1983 to 1990, she was dean of the Graduate School of Industrial
University of Pennsylvania, Administration of Carnegie- Mellon University. Dr. Bailey
Philadelphia, PA serves as a director of the College Retirement Equities Fund,
CSX Corporation, Honeywell Inc., and as a trustee of The
Director since 1989 Brookings Institution, the National Bureau of Economic Research
and Bancroft, Inc. She is a member of the Audit, Executive,
Age: 59 Nominating and Corporate Governance, and Public Affairs and
Social Responsibility Committees.
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GEOFFREY C. BIBLE Employed by the Company continuously since 1976, Mr. Bible
[PHOTO] served Philip Morris International Inc. in various executive
Chairman of the Board and capacities from 1976 to 1990, becoming its President and Chief
Chief Executive Officer Executive Officer in 1987. He served as President and Chief
Administrative Officer of Kraft Foods, Inc. ("Kraft Foods"),
Director since 1994 from 1990 to 1991, Executive Vice President, International, of
the Company from 1991 to April 1993 and Executive Vice
Age: 60 President, Worldwide Tobacco, from April 1993 to June 1994,
when he became President and Chief Executive Officer. He
assumed his present position in February 1995. He is a director
of the New York Stock Exchange, Inc., Lincoln Center for the
Performing Arts, Inc., and the International Tennis Hall of
Fame. Mr. Bible is chairman of the Executive and Finance
Committees.
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</TABLE>
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MURRAY H. BRING Employed by the Company continuously since 1988, Mr. Bring had
[PHOTO] been a partner in Arnold & Porter, Washington, DC, since 1967.
Vice Chairman, External He became Associate General Counsel of the Company in January
Affairs, and General Counsel 1988, Senior Vice President and General Counsel in July 1988,
Executive Vice President, External Affairs and General Counsel,
Director since 1988 in December 1994 and assumed his present position in March
1997. He is a director of the Whitney Museum of American Art,
Age: 63 the New York University Law Center Foundation, The William J.
Brennan Center for Justice and The New York City Opera. Mr.
Bring is a member of the Committee on Public Affairs and Social
Responsibility.
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HAROLD BROWN Dr. Brown assumed his present position at the Center for
[PHOTO] Strategic and International Studies in July 1992. Previously
Counselor, Center for and from 1984, he was chairman of the Foreign Policy Institute
Strategic and International of the School of Advanced International Studies, The Johns
Studies, Washington, DC; Hopkins University. Dr. Brown has been a partner of Warburg
Partner, Warburg Pincus & Pincus & Co. since 1990. Dr. Brown is a director of Alumax
Co., New York, NY, venture Inc., Cummins Engine Company, Inc., Evergreen Holdings, Inc.,
capital firm International Business Machines Corporation and Mattel, Inc.
Dr. Brown is chairman of the Nominating and Corporate
Director since 1983 Governance Committee and a member of the Compensation,
Corporate Employee Plans Investment, Finance, and Public
Age: 70 Affairs and Social Responsibility Committees.
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WILLIAM H. DONALDSON Mr. Donaldson assumed his present position with Donaldson,
[PHOTO] Lufkin & Jenrette in October 1995. He has been chairman of
Co-founder and Senior Donaldson Enterprises, Inc., since June 1995. Previously and
Advisor, Donaldson, Lufkin & from 1991, he was chairman and chief executive officer of the
Jenrette, New York, NY, New York Stock Exchange, Inc. He serves as a director of Aetna,
investment banking firm; Inc., Honeywell Inc., Bright Horizons, Inc., Lincoln Center for
Chairman, Donaldson the Performing Arts, and as a trustee of the Marine Corps
Enterprises, Inc., New York, University Foundation, Carnegie Endowment for International
NY, private investment firm Peace, the New York City Police Foundation, and the Foreign
Policy Association. He also serves as chairman of the Yale
Director since 1979 School of Management Advisory Board. Mr. Donaldson is chairman
of the Corporate Employee Plans Investment Committee and a
Age: 66 member of the Audit, Executive, Finance, and Nominating and
Corporate Governance Committees.
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JANE EVANS Employed by SmartTV since April 1995, Ms. Evans assumed her
[PHOTO] present position in January 1997. From 1991 to 1995 she served
Chief Executive Officer, as vice president and general manager, Home & Personal Services
SmartTV, Burbank, CA, Division of U.S. West Communications, Inc. Previously and from
portable interactivity and 1989, she was president and chief executive officer of the
electronic commerce InterPacific Retail Group. Ms. Evans serves as a director of
BancOne-Arizona Corp., Georgia-Pacific Corporation, Kaufman and
Director since 1981 Broad Home Corporation and Main St. and Main. She is chair of
the Committee on Public Affairs and Social Responsibility and a
Age: 53 member of the Corporate Employee Plans Investment and
Nominating and Corporate Governance Committees.
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ROBERT E. R. HUNTLEY Mr. Huntley retired as counsel to the law firm of Hunton &
[PHOTO] Williams in December 1995, a position he had held since
Retired lawyer, educator and December 1988. Previously, Mr. Huntley had served as chairman,
businessman president and chief executive officer of Best Products Co.,
Inc., professor of law at Washington and Lee School of Law and
Director since 1976 president of Washington and Lee University. Mr. Huntley serves
as a director of 360 Communications Corporation. He is chairman
Age: 68 of the Audit Committee and a member of the Compensation,
Finance, and Public Affairs and Social Responsibility
Committees.
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</TABLE>
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RUPERT MURDOCH Mr. Murdoch became head of News Limited of Australia in 1954
[PHOTO] and in 1959 assumed the position of chief executive of the
Chairman and Chief Executive subsequently formed parent company, The News Corporation
of The News Corporation Limited, the interests of which include TV GUIDE and FOX
Limited, New York, NY, BROADCASTING COMPANY in the United States and THE TIMES and
publishing, motion pictures SUNDAY TIMES in the United Kingdom. He is a director of British
and television Sky Broadcasting Group plc. Mr. Murdoch is a member of the
Executive Committee.
Director since 1989
Age: 66
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JOHN D. NICHOLS Mr. Nichols retired as chairman of Illinois Tool Works Inc. in
[PHOTO] May 1996, a position he had held since 1986. He had been chief
Retired; formerly Chairman, executive officer from 1982 to September 1995. He serves as a
Illinois Tool Works Inc., director of Grand Eagle Companies Inc., Household International
Glenview, IL, engineered Corporation, Rockwell International Corporation, Stone
components and industrial Container Corporation, and Junior Achievement of Chicago, as a
systems and consumables trustee of the Chicago Community Trust, the Lyric Opera of
Chicago, the Museum of Science and Industry, and the Chicago
Director since 1992 Symphony Orchestra, as a member of the Board of Overseers for
Harvard University, and as chairman of the Art Institute of
Age: 67 Chicago. He is a member of the Corporate Employee Plans
Investment, Finance, Nominating and Corporate Governance, and
Public Affairs and Social Responsibility Committees.
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LUCIO A. NOTO Employed by Mobil continuously since 1962, Mr. Noto has served
[PHOTO] Mobil in various executive capacities, including president and
Chairman and Chief Executive chief operating officer from 1993 to March 1, 1998 and chairman
Officer of Mobil Corporation, and chief executive officer from March 1994 to the present. Mr.
Fairfax, VA Noto is a director of International Business Machines
Corporation and the American Petroleum Institute. He is a
Director since January 1998 member of The Council on Foreign Relations, the Business
Council, the Business Roundtable, The Trilateral Commission and
Age: 59 the Urban Institute. He is a member of the Finance, and Public
Affairs and Social Responsibility Committees.
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RICHARD D. PARSONS Mr. Parsons assumed his present position in February 1995.
[PHOTO] Previously, he had been chief executive officer of Dime
President, Time Warner Inc., Bancorp, Inc. (formerly The Dime Savings Bank of New York, FSB)
New York, NY, media and from July 1990, having served as president and chief operating
entertainment officer from July 1988. He became chairman in 1991. From 1979
to July 1988, he had been a partner in the law firm of
Director since 1990 Patterson, Belknap, Webb & Tyler. Mr. Parsons also serves as a
director of Citicorp, the Federal National Mortgage
Age: 49 Association, Time Warner Inc., the Metropolitan Museum of Art,
Lincoln Center for the Performing Arts, Inc., and the
Rockefeller Brothers Fund, and as a trustee of Howard
University. He is a member of the Audit, Compensation,
Executive, Nominating and Corporate Governance, and Public
Affairs and Social Responsibility Committees.
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JOHN S. REED Mr. Reed assumed his present positions with Citicorp and
[PHOTO] Citibank, N.A., in 1984. He also serves as a director of
Chairman of Citicorp and Monsanto Company, as a member of the Corporation of the
Citibank, N.A., New York, NY Massachusetts Institute of Technology, and as a trustee of the
Memorial Sloan-Kettering Cancer Center. He is chairman of the
Director since 1975 Compensation Committee and a member of the Audit, Corporate
Employee Plans Investment, Executive, Finance, and Nominating
Age: 59 and Corporate Governance Committees.
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</TABLE>
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CARLOS SLIM HELU Mr. Slim assumed his present position in January 1991. He
[PHOTO] serves as chairman of the board of Telefonos de Mexico, S.A. de
Chairman of the Board of C.V., Grupo Financiero Inbursa, Carso Global Telecom, Cigarros
Grupo Carso, S.A. de C.V., La Tabacalera Mexicana and Inversora Bursatil. He is also a
Mexico director of Empresas ICA Sociedad Controladora S.A. de C.V.,
and SBC Communications Inc. He is a member of the Corporate
Director since 1997 Employee Plans Investment Committee.
Age: 58
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STEPHEN M. WOLF Mr. Wolf assumed his present position in January 1996.
[PHOTO] Previously and from August 1994, he was senior advisor in the
Chairman and Chief Executive investment banking firm of Lazard Freres & Co. LLC. Previously
Officer of US Airways Group, and from 1987, he was chairman and chief executive officer of
Inc. and US Airways, Inc., UAL Corporation and United Air Lines, Inc. He serves as a
Arlington, VA director of R.R. Donnelley & Sons Company and as a trustee of
Georgetown University, The Brookings Institution and the
Director since 1993 Alzheimer's Disease and Related Disorders Association. He is a
member of the Audit, Compensation, Nominating and Corporate
Age: 56 Governance, and Public Affairs and Social Responsibility
Committees.
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</TABLE>
COMPENSATION OF DIRECTORS
Directors who are full-time employees of the Company receive no additional
compensation for services as a director. During 1997, non-employee directors
received an annual retainer of $40,000 and fees of $1,000 for each Board meeting
attended, $1,000 ($2,000 for the chairman) for each meeting attended of the
Board Committees described above, and $500 ($1,000 for the chairman) for each
other committee meeting attended. The chairmen of the Audit and Compensation
Committees received $10,000 annual retainers for additional services rendered in
connection with committee chairman responsibilities, while the other Board
committee chairmen received annual retainers of $5,000. Effective January 1,
1998, Board meeting fees were increased to $1,500 per meeting, and the meeting
fees paid to committee chairmen were increased to $2,500.
Each non-employee director receives an annual share distribution equal to the
lesser of (i) 1,200 shares, or (ii) that number of shares of Common Stock having
an aggregate fair market value equal to the annual retainer paid during the
preceding 12 months. On May 1, 1997, each eligible director received 932 shares
of Common Stock.
A non-employee director may elect to defer meeting fees and all or part of the
annual retainer. Deferred amounts are "credited" to an unfunded account and may
be "invested" in seven "investment choices," including a Common Stock equivalent
account. These "investment choices" parallel the investment options offered to
employees under the Philip Morris Deferred Profit-Sharing Plan and determine the
"earnings" that are credited for bookkeeping purposes to a director's account.
Subject to certain restrictions, a director is permitted to take cash
distributions, in whole or in part, from his or her account either prior to or
following termination of service.
The Company has entered into employment agreements with each of its
officer-directors as described below under "Executive Compensation--Employment
Contracts, Termination of Employment and Change of Control Arrangements."
CERTAIN TRANSACTIONS
A subsidiary of Philip Morris International Inc. ("PMI") is a joint venture
partner in a Mexican cigarette business with Grupo Carso, S.A. de C.V. During
1997, PMI purchased an increased interest in the business from Grupo Carso for
approximately $400 million, as a result of which, PMI's equity interest
increased from 28.8% to 50%. Subsequently, Mr. Slim, the chairman and
controlling shareholder of Grupo Carso, became a director of the Company.
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
TO OUR STOCKHOLDERS:
The Compensation Committee is responsible for administering total compensation
programs that are designed to:
- Support the Company's efforts to develop world-class leaders;
- Match the Company's compensation plans to its business strategies, as well
as the external environment;
- Maximize profitability through growth and efficiency, balancing
appropriately the short-term and long-term goals of the Company;
- Emphasize the relationship between pay and performance by placing a
significant portion of compensation at risk and subject to the achievement
of financial goals and other critical objectives; and
- Align the interests of managers with those of stockholders through the use
of equity-based incentive awards to link a significant portion of
compensation to stock performance.
The Committee considered the following with respect to its actions during 1997
under the Company's compensation programs:
- The financial performance of the Company compared with its annual goals,
as measured by earnings-per-share growth, return on equity, volume growth,
cost reductions and implementation of strategic initiatives with respect
to targeted acquisitions and divestitures, as well as relevant financial
comparisons to the companies within the Peer Group, such as total
stockholder return and net income growth;
- The size and complexity of the Company compared with companies in the Peer
Group;
- The increased risk and uncertainty associated with the business,
litigation and regulatory environment in which the Company's domestic
tobacco business currently operates; and
- The effort to achieve a comprehensive resolution to the litigation and
regulatory issues affecting the domestic tobacco industry and the impact
of this effort on compensation issues, including issues of employee
retention.
Based on its subjective evaluation of these factors, the Committee determined
that it was appropriate to target a total compensation pay objective within the
upper quadrant, or fourth quartile, of the Peer Group. Based on the most recent
information available, total compensation for the executive officer group ranked
within the upper, or fourth, quartile relative to the compensation paid by the
Peer Group. To achieve a further correlation between executive compensation and
performance, approximately two-thirds of the compensation awarded to the
executive officer group in 1997 was at-risk incentive compensation directly
related to the performance of the Company and its business units. This includes
annual cash bonuses, long-term performance awards and long-term incentive stock
awards. By design, the majority of executive officers' at-risk compensation
consists of equity-based compensation.
BASE SALARY. Base salary is based on a qualitative evaluation of a variety of
factors, including level of responsibility, time in position, prior experience,
individual performance and a comparison to salaries paid within the Peer Group.
ANNUAL INCENTIVES. Annual cash bonuses are provided to senior executives and
middle-management employees. Early in 1997, the Committee approved a
compensation formula based on earnings per share to determine the annual
incentive awards for those officers (the "covered officers") whose
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compensation may be subject to the deductibility limitations of Section 162(m)
of the Internal Revenue Code ("IRC") (including those named in the Summary
Compensation Table).
The annual incentive payments for 1997 for the remaining participants were based
upon a qualitative evaluation of corporate and business unit performance.
Specific weights were not assigned to the factors considered. At the corporate
level, the performance factors were cash flow, return on equity, net earnings
and earnings per share as measured against the prior year, as well as against
the annual business plan. Comparisons to the Peer Group and certain strategic
measures, such as response to the business, regulatory and litigation
environment, portfolio management, employee diversity and management development
were also considered. At the business unit level, volume, return on assets, cash
flow, operating income, and strategic measures were measured against the prior
year and the annual business plan.
In 1997, awards to the covered officers were based upon the Company's
performance on earnings per share and the Committee's subjective assessment of
each executive's individual contribution. For the other corporate participants,
targeted goals were exceeded and bonuses were awarded accordingly. Performance
varied across the individual business units, and bonuses were awarded at, above
or below target levels, accordingly.
LONG-TERM INCENTIVES. The Company's 1997 Performance Incentive Plan (the "1997
Plan"), approved by shareholders at the 1997 Annual Meeting, provides for stock
options, stock appreciation rights ("SARs"), restricted stock, annual and
long-term performance awards, and other "stock-based" awards to be granted to
key executives who contribute to the management, growth and profitability of the
Company.
- STOCK OPTIONS. In 1997, the Committee targeted its stock option award
guidelines at the 65th percentile of the Peer Group. The size of actual
stock option awards was adjusted upward or downward based on a subjective
evaluation of individual contribution and potential.
- RESTRICTED STOCK. The Committee granted restricted stock awards to 81
executives, including two of the executive officers named in the Summary
Compensation Table. The decision to grant restricted stock was made to
recognize and reward individuals with high potential and to address
specific retention and leadership development needs. The amount of the
restricted stock awarded was based on the Committee's subjective
assessment of an individual's potential contribution to the future growth
and success of the Company.
The restricted shares vest only after the participant's continued
employment with the Company for a five-year period following the date of
grant. However, the restricted shares granted to covered officers vest
only at retirement at age 65, unless the Committee determines that
continuation of the vesting period will no longer be necessary to assure
deductibility.
- LONG-TERM PERFORMANCE AWARDS. A three-year long-term performance cycle
under the predecessor to the 1997 Plan began January 1, 1995, and
concluded December 31, 1997.
The awards for the covered officers were payable in cash and based on a
formula tied to the achievement of cumulative net income during the
performance cycle once a cumulative earnings-per-share hurdle was exceeded
and on an evaluation of each executive's performance.
Awards payable in cash to the other participants were based on a
qualitative evaluation of individual business unit performance relative to
the strategic plan and on an assessment of individual performance. The
performance factors vary by business unit and include quantitative
financial measures such as income from operations, cash flow, volume and
return on assets, and strategic measures such as market share, portfolio
management and management development.
8
<PAGE>
No specific weights were assigned to the factors considered; however, the
individual performance factor was limited to an adjustment of plus or
minus 25%. Performance varied across the business units, and long-term
awards were awarded at, above or below target levels, accordingly.
COMPENSATION OF THE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER. Effective
July 1, 1997, Mr. Bible's annual base salary was increased from $1,250,000 to
$1,500,000. Mr. Bible last received an increase in base salary on July 1, 1995.
The determination to increase Mr. Bible's salary was based on a qualitative
evaluation of salaries paid to chief executive officers of other companies in
the Peer Group and Mr. Bible's contribution to the performance of the Company.
In addition to base salary, Mr. Bible earned an annual incentive award for 1997
in accordance with the formula established at the beginning of the year, which
was applicable to all covered officers. Mr. Bible's bonus ranked within the
upper quartile of bonuses paid to the chief executive officers in the Peer
Group.
In 1997, the Committee awarded Mr. Bible a ten-year nonqualified stock option
for 1,000,000 shares with an exercise price equal to the fair market value of
the stock on the date of grant. The stock option award was granted in tandem
with stock appreciation rights that are payable only in shares of stock, the
exercise of which results in the cancellation of the corresponding option. The
Committee has observed that Mr. Bible has generally held his stock options until
they were about to expire, and has not disposed of option shares except as
needed to cover an option's exercise price and related taxes, thus making stock
options a particularly effective long-term incentive and award mechanism for
further aligning his interests with those of stockholders.
The primary factors considered in determining the size of Mr. Bible's stock
option award were Mr. Bible's performance with respect to the achievement of key
strategic, financial and management development objectives, including his
efforts to achieve a comprehensive resolution of litigation and regulatory
issues facing the domestic tobacco business, to ensure that top executive
succession plans are in place, and the desire to achieve an equitable position
for Mr. Bible comparable to that of other chief executive officers in the Peer
Group and other Fortune 100 companies.
Mr. Bible's contribution to the performance of the Company is illustrated in the
table below. This table sets forth measures of the Company's financial
performance for 1997 and shows the compound annualized rate of change in those
measures from the 12-month period preceding Mr. Bible's tenure as chief
executive officer, which began on June 20, 1994.
<TABLE>
<CAPTION>
12 MONTHS ENDED COMPOUNDED
---------------------- ANNUALIZED RATE
ELEMENT OF COMPANY PERFORMANCE 6/30/94 12/31/97 OF CHANGE
- ----------------------------------------------------------------- --------- ----------- ----------------
<S> <C> <C> <C>
- - Net Earnings (in millions)..................................... $ 3,709 $ 6,310 +16.4%/year
- - Operating Cash Flow(1) (in millions)........................... 6,633 8,715 + 8.1%/year
- - Market Value at End of Period (in millions).................... 44,700 109,753 +29.3%/year
- - Annualized Dividend Rate per Share............................. .92 1.60 +17.1%/year
- - Basic Earnings per Share....................................... 1.42 2.61 +19.0%/year
- - Return on Equity............................................... 30.9% 43.3% +12.4 points(2)
</TABLE>
- ------------------------
(1) Before income taxes on sales of businesses and interest payment on zero
coupon bonds.
(2) Total percentage-point increase.
Mr. Bible also received an award under the long-term performance plan in
accordance with the formula established at the beginning of 1995 and applicable
to all covered officers. Mr. Bible's long-term incentive compensation awards
rank within the upper quartile of awards made to the chairmen and chief
executive officers of the Peer Group. The amount of his total compensation also
places Mr. Bible within the upper quartile relative to the Peer Group.
9
<PAGE>
POLICY WITH RESPECT TO QUALIFYING COMPENSATION FOR DEDUCTIBILITY. Section 162(m)
of the IRC generally limits to $1,000,000 the annual tax-deductible compensation
paid to a covered officer. However, the limitation does not apply to
performance-based compensation, provided that certain conditions are satisfied.
The Company's policy is generally to preserve the federal income tax
deductibility of compensation paid. Accordingly, the Company has taken
appropriate actions, to the extent it believes feasible, to preserve the
deductibility of annual incentive, long-term performance, restricted stock and
stock option awards. However, notwithstanding the Company's general policy, the
Committee has authorized and will continue to retain the authority to authorize
payments that may not be deductible if it believes that it is in the best
interests of the Company and its stockholders. The Committee determined, after
an analysis of competitive practices and a thorough review of alternatives, that
it was appropriate to continue to pay Mr. Bible a base salary in excess of
$1,000,000. This action will cause a portion of his compensation to exceed the
$1,000,000 deductibility limit. Certain other elements of annual compensation,
such as perquisites, dividends paid in cash on restricted stock, payments
related to reducing unfunded retirement benefits, tax reimbursements, and income
resulting from payments made pursuant to plans that do not discriminate in favor
of executive officers, may cause a portion of covered officers' income to exceed
the deductibility limit.
COMPENSATION COMMITTEE:
John S. Reed, Chairman
Harold Brown
Robert E. R. Huntley
Richard D. Parsons
Stephen M. Wolf
10
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following graph compares the cumulative total stockholder return on Philip
Morris Common Stock for the last five years with the cumulative total return for
the same period of the Peer Group(1), S&P 500 Index and S&P 500 Foods, S&P 500
Beverages (Alcoholic) and S&P 500 Tobacco Indices(2). The graph assumes the
investment of $100 in Philip Morris Common Stock, the Peer Group, the S&P 500
Index and the S&P 500 Foods/Beverages/Tobacco Indices on December 31, 1992, and
reinvestment of all dividends.
As can be seen in the graph, Philip Morris' five-year cumulative total
stockholder return has been affected by the Company's pricing strategy in
domestic tobacco during 1993 to preserve and increase stockholder value over the
long term, and the intense external environment in which the Company's domestic
tobacco business has operated recently.
In addition to the creation of stockholder value, the Company's executive
compensation program is based on financial and strategic results as discussed in
the Compensation Committee Report on Executive Compensation.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PHILIP MORRIS COMPANIES INC. PEER GROUP(1) S&P 500 S&P FOODS/BEV/TOBACCO(2)
<S> <C> <C> <C> <C>
12/92 $ 100.00 $ 100.00 $ 100.00 $ 100.00
12/93 75.76 104.73 110.03 95.38
12/94 82.70 114.10 111.53 102.50
12/95 135.99 163.42 153.30 133.24
12/96 178.07 212.48 188.40 156.48
12/97 222.17 289.98 251.17 211.35
</TABLE>
- ------------------------
(1) The Peer Group consists of the following companies, selected on the basis of
size, complexity and return to stockholders: American Home Products Corporation,
Amoco Corporation, Anheuser-Busch Companies, Inc., ARCO, The Boeing Company,
Bristol-Myers Squibb Company, Chevron Corporation, The Coca-Cola Company,
ConAgra, Inc., CPC International, Inc. (now known as Bestfoods), E.I. du Pont de
Nemours and Company, Exxon Corporation, General Electric Company, General Mills,
Inc., H.J. Heinz Company, International Business Machines Corporation, Johnson &
Johnson, Merck & Company, Inc., Mobil Corporation, PepsiCo, Inc., Pfizer, Inc.,
The Procter & Gamble Company, RJR Nabisco Holdings Corp., Sara Lee Corporation
and Texaco, Inc.
(2) No standardized industry index is considered a comparable peer group. The
following companies constitute the S&P 500 Foods, S&P 500 Beverages (Alcoholic)
and S&P 500 Tobacco Indices: Adolph Coors Company, Anheuser-Busch Companies,
Inc., Brown-Forman Corporation, Campbell Soup Company, ConAgra, Inc., CPC
International, Inc. (now known as Bestfoods), General Mills, Inc., H.J. Heinz
Company, Hershey Foods Corporation, Kellogg Company, The Quaker Oats Company,
Ralston Purina Company, Sara Lee Corporation, The Seagram Company, Ltd.,
Unilever N.V., UST Inc., and Wm. Wrigley Jr. Company. Although the Company is a
component of the S&P 500 Tobacco Index, it has been excluded for the purpose of
this presentation.
11
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------
AWARDS
ANNUAL COMPENSATION ---------------------------
------------------------------------- SECURITIES PAYOUTS
OTHER ANNUAL RESTRICTED UNDERLYING ---------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION STOCK VALUE(1) OPTIONS LTIP(2)
- ---------------------------------- --------- --------- --------- --------------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ $ $ $ SHS. $
Geoffrey C. Bible................. 1997 1,375,000 1,900,000 142,505(4) -0- 1,000,000 6,000,000
Chairman of the Board and 1996 1,250,000 1,562,500 39,191(4) 5,700,000 600,000 -0-
Chief Executive Officer 1995 1,125,000 1,350,000 21,929 -0- 420,000 -0-
Murray H. Bring................... 1997 843,327 1,050,000 63,284(4) 2,118,025 200,000 3,050,000
Vice Chairman, External Affairs, 1996 695,000 800,000 22,022(4) -0- 600,000 -0-
and General Counsel(a) 1995 650,000 650,000 1,380 -0- 180,000 -0-
William H. Webb................... 1997 745,673 825,000 49,032(4) -0- 159,600 2,775,000
Chief Operating Officer(b) 1996 618,750 690,000 18,384(4) -0- 360,000 -0-
1995 575,000 600,000 -0- 1,490,000 180,000 -0-
Louis C. Camilleri................ 1997 661,667 725,000 6,466(4) 1,477,963 118,600 2,450,000
Senior Vice President, 1996 578,333 550,000 -0- -0- 270,000 -0-
Chief Financial Officer(c) 1995 449,728 450,000 -0- -0- 55,800 -0-
Andreas Gembler................... 1997 615,774 650,000 -0- -0- 109,500 2,525,000
President and Chief Executive
Officer, Philip Morris
International Inc.(d)
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION(3)
- ---------------------------------- -----------------
<S> <C>
$
Geoffrey C. Bible................. 206,250
Chairman of the Board and 187,500
Chief Executive Officer 157,657
Murray H. Bring................... 126,499
Vice Chairman, External Affairs, 104,250
and General Counsel(a) 91,090
William H. Webb................... 111,851
Chief Operating Officer(b) 92,813
80,903
Louis C. Camilleri................ 99,250
Senior Vice President, 88,046
Chief Financial Officer(c) 58,205
Andreas Gembler................... 65,385
President and Chief Executive
Officer, Philip Morris
International Inc.(d)
</TABLE>
- ------------------------------
(a) Mr. Bring was promoted from Executive Vice President, External Affairs, and
General Counsel to his current position in March 1997.
(b) Mr. Webb was promoted from President and Chief Executive Officer, Philip
Morris International Inc., to his current position in March 1997.
(c) Mr. Camilleri was promoted from President and Chief Executive Officer, Kraft
Foods International, Inc., to his current position in November 1996; in 1995 he
had been appointed Vice President, Corporate Business Strategy in February and
Senior Vice President, Corporate Planning, of the Company in August.
(d) Mr. Gembler was promoted from President Eastern Europe/Middle East/Africa,
Philip Morris International Inc. to his current position in March 1997.
(1) Dollar values of restricted stock awards are based on the closing price of
Common Stock on the date of grant. The awards reflected in the table, together
with shares resulting from the reinvestment of dividends thereon, will vest at
retirement at age 65 unless otherwise determined by the Compensation Committee.
During 1997, dividends on the restricted stock awards, otherwise payable in cash
to the covered officers, were paid in additional shares of restricted stock,
with the exception of dividends from the 1996 award to Mr. Bible, which were
paid in cash. At December 31, 1997, each of the named executive officers held
shares of restricted stock, with a value at such date as follows: Mr. Bible,
440,681 shares, $19,940,815; Mr. Bring, 227,677 shares, $10,302,384; Mr. Webb,
140,449 shares, $6,355,317; Mr. Camilleri, 38,100 shares, $1,724,025; and Mr.
Gembler, 48,000 shares, $2,172,000.
(2) In 1997, a limited number of senior executives earned long-term performance
awards for performance covering a three-year cycle commencing January 1, 1995,
and ending December 31, 1997. The awards to the executive officers named in this
table were based on a formula fixed in 1995 and tied to achievement of
cumulative net income over a three-year period once an adjusted
earnings-per-share hurdle had been exceeded.
(3) The amounts in this column consist of allocations to defined contribution
plans.
The Company provides funding for individual trusts for the covered officers and
certain other employees with vested accrued benefits under nonqualified
supplemental retirement plans. During 1997, the following amounts, less
applicable tax withholding, were deposited in individual trusts for the named
executive officers to provide funding for allocations to Philip Morris
supplemental defined contribution plans for prior years (previously reportable
as "All Other Compensation") and, except as noted, for earnings through the end
of 1996 on such allocations: Mr. Bible, $174,010 (allocations and earnings
through June 30, 1997); Mr. Bring, $120,463; Mr. Webb, $102,321; and Mr.
Camilleri, $83,838. The funding of these amounts is not intended to increase
total promised benefits.
(4) Includes reimbursement for taxes on a portion of the earnings on assets held
in trusts of individual officers. These trust assets offset amounts, otherwise
payable by the Company, for vested benefits under supplemental retirement plans
and are not intended to increase total promised benefits.
12
<PAGE>
1997 OPTION GRANTS
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SHARES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION DATE GRANT DATE
NAME GRANTED FISCAL YEAR PRICE (1) PRESENT VALUE (2)
- ----------------------------- ----------- ----------------- --------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
Geoffrey C. Bible............ 1,000,000(3) 6.21% $ 43.875 June 22, 2007 $ 10,830,000
Murray H. Bring.............. 200,000(3) 1.24 43.875 June 22, 2007 2,166,000
William H. Webb.............. 159,600 0.99 43.875 June 22, 2007 1,728,468
Louis C. Camilleri........... 118,600 0.74 43.875 June 22, 2007 1,284,438
Andreas Gembler.............. 109,500 0.68 43.875 June 22, 2007 1,185,885
</TABLE>
- ------------------------
(1) Options that expire on June 22, 2007, are not exercisable until one year
after the date of grant. However, in the case of death, permanent disability or
retirement, the Compensation Committee has the discretion to accelerate vesting.
(2) In accordance with Securities and Exchange Commission rules, grant date
present value is determined using the Black-Scholes Model. The Black-Scholes
Model is a complicated mathematical formula widely used to value exchange-traded
options. However, stock options granted by the Company are long-term,
non-transferable and subject to vesting restrictions, while exchange-traded
options are short-term and can be exercised or sold immediately in a liquid
market. The Black-Scholes Model relies on several key assumptions to estimate
the present value of options, including the volatility of, and dividend yield
on, the security underlying the option, the risk-free rate of return on the date
of grant and the estimated time period until exercise of the option. In
calculating the grant date present values set forth in the table, a factor of
27.861% was assigned to the volatility of the Common Stock, based on the monthly
closing stock prices and dividends for the five-year period preceding the grant
date; the yield on the Common Stock was set at 3.65%, based on an annual
dividend rate of $1.60 per share (the dividend rate in effect at the time the
options were granted); the risk-free rate of return was fixed at 6.38%, the rate
for a five-year U.S. Treasury Note for the month of grant as reported in the
Federal Reserve Statistical Release H.15(159); and an estimated time period of
five years until exercise was used. Consequently, the grant date present values
set forth in the table are only theoretical values and may not accurately
determine present value. The actual value, if any, an optionee will realize will
depend on the excess of market value of the Common Stock over the exercise price
on the date the option is exercised.
(3) Stock option award granted in tandem with stock appreciation rights payable
only in shares of Common Stock.
1997 OPTION EXERCISES AND YEAR-END VALUES
<TABLE>
<CAPTION>
TOTAL NUMBER OF
SHARES UNDERLYING TOTAL VALUE OF UNEXERCISED
NUMBER UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
OF SHARES HELD AT HELD AT
ACQUIRED DECEMBER 31, 1997 DECEMBER 31, 1997(1)
ON VALUE ---------------------------- ------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- ----------- ------------- ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Geoffrey C. Bible............... 84,000 $ 2,938,250 3,368,160 1,000,000 $ 72,191,322 $ 1,375,000
Murray H. Bring................. 117,090 2,766,251 679,830 440,000 10,213,634 1,535,000
William H. Webb................. 60,000 1,443,750 446,280 315,600 7,369,070 1,038,450
Louis C. Camilleri.............. -0- -0- 250,140 262,600 4,016,225 919,075
Andreas Gembler................. 183,120 2,849,810 126,000 253,500 1,120,875 906,563
</TABLE>
- ------------------------
(1) Based on the closing price of the Common Stock of $45.25 on December 31,
1997.
13
<PAGE>
PENSION PLAN TABLE--PHILIP MORRIS RETIREMENT PLAN
<TABLE>
<CAPTION>
FIVE-YEAR
AVERAGE YEARS OF SERVICE(1)
ANNUAL -----------------------------------------------------------------------
COMPENSATION 15 20 25 30 35
- -------------- ----------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$500,000..... $ 129,849 $ 173,132 $ 216,415 $ 259,698 $ 302,982
750,000...... 195,474 260,632 325,790 390,948 456,107
1,000,000.... 261,099 348,132 435,165 522,198 609,232
1,250,000.... 326,724 435,632 544,540 653,448 762,357
1,500,000.... 392,349 523,132 653,915 784,698 915,482
1,750,000.... 457,974 610,632 763,290 915,948 1,068,607
2,000,000.... 523,599 698,132 872,665 1,047,198 1,221,732
2,250,000.... 589,224 785,632 982,040 1,178,448 1,374,857
2,500,000.... 654,849 873,132 1,091,415 1,309,698 1,527,982
2,750,000.... 720,474 960,632 1,200,790 1,440,948 1,681,107
3,000,000.... 786,099 1,048,132 1,310,165 1,572,198 1,834,232
</TABLE>
- ------------------------
(1) At February 1, 1998, Messrs. Bible, Bring, Webb, Camilleri and Gembler had
accredited service of 14, 23, 32, 19 and 30 years, respectively.
Messrs. Bible, Bring, Webb, Camilleri and Gembler participate in the
tax-qualified Philip Morris Salaried Employees Retirement Plan and one or more
supplemental nonqualified pension plans (collectively, the "Retirement Plan").
The Retirement Plan is a non-contributory plan maintained for the benefit of
certain employees of the Company. The Retirement Plan provides for fixed
retirement benefits in relation to the participant's years of accredited
service, five-year average annual compensation (the highest average annual
compensation during any period of five consecutive years out of the ten years
preceding retirement) and applicable Social Security covered compensation
amount. Allowances are payable upon retirement at the normal retirement age of
65 and at earlier ages. Compensation includes the amount shown as annual salary
and bonus in the Summary Compensation Table. At December 31, 1997, five-year
average annual compensation for Mr. Bible was $2,078,500; Mr. Bring, $1,158,558;
Mr. Webb, $1,052,370; Mr. Camilleri, $712,030; and Mr. Gembler, $685,281.
However, a participant with more than 35 years of accredited service is limited
to the greater of a full retirement allowance based upon 35 years of service and
five-year average annual compensation, including annual bonus awards, or a full
retirement allowance based on all service and five-year average annual
compensation, excluding such awards.
Examples of annual retirement allowances payable under the Retirement Plan are
set forth in the above table. The examples, which assume retirement at the
normal retirement age of 65, are based upon the Social Security covered
compensation amount in effect for an employee attaining age 65 in calendar year
1998. Mr. Bible is also eligible to receive a retirement benefit under the
retirement plan of a Swiss subsidiary of the Company and under nonqualified
supplemental pension plans based on the Swiss pension plan formula. At his
current annual salary, upon retirement at age 65, he would receive, in addition
to the retirement allowances payable to him under the Retirement Plan, an annual
benefit of Sfr.801,541 (approximately $543,418 on February 2, 1998). Messrs.
Bible, Camilleri and Gembler are also eligible for benefits under one or more
pension plans of other Company subsidiaries. These benefits offset, and are not
in addition to, benefits provided under the Philip Morris Retirement Plan. The
Company provides funding for individual trusts for the covered officers and
certain other employees with vested accrued benefits under nonqualified
supplemental retirement plans. During 1997, the following amounts, less
applicable tax withholding, were deposited in individual trusts for the named
executive officers with respect to benefits previously accrued under the Philip
Morris supplemental pension plans:
14
<PAGE>
Mr. Bible, $2,240,317; Mr. Bring, $501,540; Mr. Webb, $1,666,090; and Mr.
Camilleri, $58,693. These amounts offset benefits previously accrued and do not
increase total promised benefits.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
The Company has entered into change of control employment agreements with each
of its officer-directors and each of its other executive officers, including
those named in the Summary Compensation Table. The agreements provide that, if
the executive is terminated other than for cause within three years after a
change of control of the Company or if the executive terminates his or her
employment for good reason within such three-year period or voluntarily during
the thirty-day period following the first anniversary of the change of control,
the executive is entitled to receive a lump-sum severance payment equal to two
and one-half times the sum of his base salary and highest annual bonus, together
with certain other payments and benefits, including continuation of employee
welfare benefits. An additional payment is required to compensate the executive
for excise taxes imposed upon payments under the agreement.
Mr. Bring has entered into an employment agreement with the Company that
provides, among other things, for a minimum base salary and participation in
benefit plans, including an enhanced retirement benefit.
15
<PAGE>
OWNERSHIP OF EQUITY SECURITIES
The following table sets forth information regarding beneficial ownership of
Common Stock as of February 2, 1998, by each director, nominee for director, and
executive officer named in the Summary Compensation Table and by the directors
and executive officers of the Company as a group. The beneficial ownership of
each director and executive officer and of the group is less than 1% of the
outstanding shares.
<TABLE>
<CAPTION>
SOLE VOTING
NAME AND INVESTMENT POWER(1) OTHER(2) TOTAL
- ---------------------------------------------------------- ------------------------ ----------- -------------
<S> <C> <C> <C>
Elizabeth E. Bailey....................................... 16,130 16,130
Geoffrey C. Bible......................................... 3,368,639 516,540 3,885,179
Murray H. Bring........................................... 747,258 227,677 974,935
Harold Brown.............................................. 14,735 14,735
Louis C. Camilleri........................................ 295,797 38,325 334,122
William H. Donaldson...................................... 36,335 36,335
Jane Evans................................................ 13,805 13,805
Andreas Gembler........................................... 232,676 48,000 280,676
Robert E. R. Huntley...................................... 26,435 3,600 30,035
Rupert Murdoch............................................ 84,035 84,035
John D. Nichols........................................... 13,430 2,400 15,830
Lucio A. Noto............................................. 13,951 13,951
Richard D. Parsons........................................ 9,900 9,900
Roger S. Penske........................................... 10,235 10,235
John S. Reed.............................................. 47,432 47,432
Carlos Slim Helu..........................................
William H. Webb........................................... 510,615 140,449 651,064
Stephen M. Wolf........................................... 7,130 7,130
Group..................................................... 9,187,881 1,387,321 10,575,202
</TABLE>
- ---------------
(1) Includes maximum number of shares subject to purchase before April 2, 1998,
upon the exercise of stock options, as follows: Mr. Bible, 3,368,160; Mr. Bring,
739,830; Mr. Camilleri, 286,140; Mr. Gembler, 162,000; Mr. Webb, 485,280; and
group, 8,152,545.
(2) Includes shares owned or held by spouses, minor children and other relatives
sharing the home of the director or executive officer. In certain cases,
beneficial ownership of these shares is disclaimed. Also includes shares owned
or held jointly with spouses, shares of restricted stock held by executive
officers and shares held in certain fiduciary capacities (including such
holdings by a spouse).
The following table sets forth information regarding persons or groups known to
the Company to be beneficial owners of more than 5% of the Company's outstanding
Common Stock.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF COMMON STOCK
SHARES OUTSTANDING ON
NAME AND ADDRESS OF BENEFICIALLY FEBRUARY 27,
BENEFICIAL OWNER OWNED 1998
- -------------------------------------------------------------------------------- -------------- -----------------
<S> <C> <C>
FMR Corp........................................................................ 203,416,317(1) 8.38%
82 Devonshire Street
Boston, MA 02109
</TABLE>
- ---------------
(1) According to Schedule 13G, dated February 14, 1998, filed with the
Securities and Exchange Commission jointly by FMR Corp., Edward C. Johnson 3d,
Abigail P. Johnson and Fidelity Management & Research Company ("Fidelity"), Mr.
Johnson is chairman and Ms. Johnson is a director of FMR Corp. and may be deemed
to be members of a controlling group with respect to FMR Corp. The Schedule 13G
16
<PAGE>
indicates that at December 31, 1997, (i) Fidelity, a wholly-owned subsidiary of
FMR Corp., was the beneficial owner of 190,696,800 shares of Common Stock in its
capacity as investment adviser to various registered investment companies (the
"Fidelity Funds") (the power to vote such shares resides solely with the boards
of trustees of the Fidelity Funds, while the power to dispose of such shares
resides with Mr. Johnson, FMR Corp., Fidelity and the Fidelity Funds); (ii)
Fidelity Management Trust Company, a bank that is wholly-owned by FMR Corp., was
the beneficial owner of 11,617,077 shares of Common Stock; (iii) Mr. Johnson was
the beneficial owner, either directly or through trusts, of 65,250 shares of
Common Stock; and (iv) Fidelity International Limited, an investment adviser of
which Mr. Johnson is chairman but which is managed independently from FMR Corp.,
was the beneficial owner of 1,037,190 shares of Common Stock. FMR Corp. and
Fidelity International Limited each disclaim beneficial ownership of Common
Stock beneficially owned by the other.
SELECTION OF AUDITORS
Upon the recommendation of the Audit Committee and subject to stockholder
approval, the Board has retained Coopers & Lybrand L.L.P. as the Company's
auditors for the fiscal year ending December 31, 1998. Coopers & Lybrand L.L.P.
has been the independent accountants of the Company since 1933. A representative
of Coopers & Lybrand L.L.P. will be present at the meeting. The representative
will be given an opportunity to make a statement if he or she desires to do so
and will be available to answer questions.
THE BOARD RECOMMENDS A VOTE FOR THE SELECTION OF COOPERS & LYBRAND L.L.P.
STOCKHOLDER PROPOSALS
Stockholders have submitted the two proposals set forth below. The proposals
have been duly considered by the Board, which has concluded that their adoption
would not be in the Company's best interests. For the reasons set forth after
each proposal, the Board recommends a vote AGAINST each proposal.
PROPOSAL 1--PROTECTING YOUTH FROM SMOKING IN DEVELOPING COUNTRIES
The Congregation of the Sisters of Charity of the Incarnate Word, P.O. Box
230969, 6510 Lawndale, Houston, TX 77223-0969, claiming beneficial ownership of
3,000 shares of Common Stock, together with four co-proponents, submitted the
proposal set forth below. The names, addresses and shareholdings of the
co-proponents will be furnished upon request made to the Secretary of the
Company.
"WHEREAS, our Company has launched a campaign to prevent youth from smoking in
the United States called "Action Against Access." It calls for the company not
to offer free samples of cigarettes or send cigarettes through the mail, place
warnings of packages indicating that sales to minors is prohibited, support laws
prohibiting tobacco sales to minors and train retailers not to sell to minors.
We see this as an important step;
- -- Due, in great part to our company's major marketing thrust, Philip Morris'
sale of cigarettes have soared in international markets, particularly in the
developing countries of Asia and Eastern Europe;
- -- A recent study among school children (average age 10) in Hong Kong found
that 95% of the children recognize the brand name Marlboro;
- -- At the same time, a 1992 Bush Administration, U.S. Government Accounting
Office report on "International Trade: Advertising and Promoting U.S.
Cigarettes in Selected Asian Countries," indicated extensive violation of
host country codes by U.S. cigarette companies;
- -- A NEW YORK TIMES article (05/15/94) noted that: "Most governments in Asia
have launched anti-smoking campaigns, but their efforts tend to be
overwhelmed by the Madison Avenue glitz unleashed by the cigarette giants.
Several Asian nations have banned cigarette advertising on
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television and radio in recent years. But the tobacco companies often find
ways around the bans through indirect promotions that skirt the law--sports
events, glossy advertisements for clothing brands or travel agencies that
bear that name and logo of a cigarette brand;"
- -- Our company has used movie stars popular with U.S. teens, such as Roger
Moore and Tom Beringer, to advertise its cigarettes in Asia;
- -- Our company was sued in the Philippines in 1987 by alleging that our company
advertised and marketed cigarettes to Filipino children using methods that
are prohibited in the United States. Successful litigation in the
Philippines or other developing countries could adversely effect the value
of our stock;
- -- Lawsuits in the United States have alleged that, decades ago, our company
conducted advertising and marketing practices that enticed children to
smoke. If these lawsuits are successful the value of our stock could be
effected and used by people in other nations where similar actions may be
demonstrated;
- -- The World Health Organization (WHO) estimates that by the time young smokers
from developing countries reach their middle age years (2025), 7 million
deaths from smoking will occur each year in those countries. These figures
represent epidemic proportions;
RESOLVED that shareholders request management to implement the same programs
that the Company has voluntarily proposed and adopted in the United States to
prevent youth from smoking and buying our cigarettes in developing countries.
Supporting Statement
Much of the recent growth in cigarette sales has taken place in developing
countries. We think this proposal takes a fair and reasonable approach. To
protect children from developing countries from smoking and protect our company
in future litigation, we urge shareholders to vote FOR this proposal."
THE BOARD RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
The Company shares the proponents' desire to prevent youth smoking and is
committed to taking action to prevent the sale of cigarettes to minors. However,
we believe that effective programs to combat youth smoking must be adapted to
local conditions, many of which are vastly different than those in the United
States. The products of Philip Morris International, our international tobacco
business, are sold in numerous countries around the world, each with its own
culture, laws and market conditions.
The proposal asks us to take a program specifically designed for the United
States and apply it without regard to its effectiveness under local conditions.
For example, many elements of the Company's domestic program seek to assure
compliance with minimum-age laws that are already on the books in every state.
Transplanting a program based on these legal restrictions is not the most
effective way to curtail youth smoking in countries that lack minimum-age laws.
Nor is the unilateral imposition of our U.S.-oriented program likely to have the
desired effect in countries in which Philip Morris International is a relatively
small competitor. More than half of all the cigarettes sold outside the United
States are manufactured by companies owned by foreign governments. In countries
such as these, we believe it is better to work with local governments than to
act alone, ineffectively. In contrast to the proposal's well-intentioned but
"one size fits all" approach, we believe it makes more sense to continue to take
action against youth smoking in a manner that recognizes the diversity of the
markets in which Philip Morris International operates.
To this end, we have initiated 60 programs against youth smoking in 36 countries
and are increasing the momentum. We launched 18 new programs last year and will
launch 35 more programs this year. In developing countries, these programs have
included the creation of retailer-endorsed campaigns where
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<PAGE>
there are no minimum-age laws; support for retail education programs and the
posting of minimum-age notices at retail; and educational programs to dissuade
minors from smoking. As we move forward, the Company is committed to further
initiatives, working proactively with government, public health authorities and,
importantly, other participants in the industry, to achieve more effective
results than those which the Company could achieve unilaterally. We will, for
example, work with others to support minimum-age laws in countries where they
are not yet in effect, and we intend to work with educational institutions to
develop and put in place more effective youth anti-smoking programs.
This proposal was defeated by stockholders at the 1997 Annual Meeting. Your
Board continues to believe that the action requested by the proponents is not an
effective approach to the important issue of youth smoking in developing
countries.
THEREFORE, YOUR BOARD URGES STOCKHOLDERS TO VOTE AGAINST THIS PROPOSAL.
PROPOSAL 2--ESTABLISH A REVIEW COMMITTEE TO INVESTIGATE AND RECOMMEND ACTIONS
RELATED TO SMUGGLED CIGARETTES OF THE COMPANY
The Province of St. Joseph of the Capuchin Order, 1015 North Ninth Street,
Milwaukee, WI 53233, claiming beneficial ownership of 300 shares of Common
Stock, submitted the proposal set forth below.
"WHEREAS a recent front-page expose in THE NEW YORK TIMES, headlined "Cigarette
Makers Are Seen As Aiding Rise in Smuggling," noted that the "tobacco giants
deny" any "role in illegal trade," but that "inquiries show there may be one."
- -- The article states that "the largest tobacco companies are selling billions
of dollars of cigarettes each year to traders and dealers who funnel them
into black markets in many countries, say law enforcement officials and
participants in the trade. In the last decade, the volume of cigarette
smuggling around the world has nearly tripled, according to a leading
tobacco research organization. This reflects a general surge in cigarette
sales abroad, especially for American brands. And industry officials
acknowledge that a sizable share--the researchers say one-fourth--of the
cigarettes sold overseas pass through smuggling rings set up to evade
foreign taxes and sell major brands at a discount."
- -- The article also noted "the companies say they do nothing to encourage the
smuggling and do not condone it. But recent criminal investigations in
several countries show that people in the tobacco industry have played a
significant role at times in stimulating and fueling it."
- -- Specific mention was made of "two organized crime groups in Italy [who] take
in $500 million a year by smuggling in Marlboros they buy from Swiss dealers
selling products made by the Philip Morris Companies, America's largest
cigarette maker." It continued, "If the companies say they do not, 'It's a
lie,' said Corrado Bianchi, who said he had sold Philip Morris cigarettes as
a dealer in Switzerland before retiring two years ago. 'Of course they
know."'
- -- One of our competitors' employees has already been indicted by a federal
grand jury for conspiring to defraud the U.S. of tax revenue in a cigarette
smuggling scheme into Canada. "By selling 24,000 cases of these cigarettes
tax-free, the conspirators made over a million dollars in windfall profits,"
U.S. Attorney Eddie J. Jordan said in a statement issued with the
indictments. (LOS ANGELES TIMES, May 24, 1996). This amount pales in
comparison to what is expected to be lost by such smuggling on a global
basis.
- -- We believe that the scope of this smuggling may force changes in the $368.5
billion settlement being negotiated with the American tobacco industry by
the Clinton Administration.
RESOLVED: the shareholders request the Board to establish an independent
committee of independent directors to determine the extent of our Company's
involvement directly or indirectly in smuggling its
19
<PAGE>
cigarettes throughout the world and to make whatever recommendations are
appropriate to ensure that our Company is not involved in any way in marketing
its cigarettes in ways that assist smuggling. This Committee shall report its
findings and recommendations to the shareholders prior to the 1999 annual
meeting."
THE BOARD RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
Your Board does not believe that it is necessary or appropriate to take the
actions requested by the proponent. The Company already has in place a worldwide
business conduct policy that requires employees of the Company and its
subsidiaries to comply with the laws and regulations of the countries in which
they do business. The policy is monitored on a continuing basis, and significant
violations are brought to the attention of the Audit Committee, a Committee
composed entirely of independent directors. The newspaper article to which the
proponent refers makes reference to an investigation concerning cigarette
smuggling involving an employee of a competitor. To the Company's knowledge, the
investigation is not directed at the Company, its subsidiaries or employees. If
it were, that would be brought to the attention of the Audit Committee in the
normal course of business. Accordingly, the Company already has in place proper
procedures to deal with this type of issue.
Cigarette smuggling is primarily a serious problem in a few foreign countries
with heavily taxed products or products that are subjected to trade barriers.
The principal factors associated with these problems are national tax and trade
policies, the effectiveness of governmental enforcement efforts, and overall
cultural attitudes toward tax discipline. Contraband cigarettes compete unfairly
with legitimately distributed products of the Company in problem countries, and
the Company's tobacco subsidiaries cooperate with the governments of these
countries to help them in their efforts to reduce or eliminate the problem.
THEREFORE, YOUR BOARD URGES STOCKHOLDERS TO VOTE AGAINST THIS PROPOSAL.
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OTHER MATTERS
Management knows of no other business that will be presented to the meeting for
a vote, except that it is possible that stockholder proposals not included in
this proxy statement may be presented. If other matters properly come before the
meeting, including proposals omitted from this proxy statement and accompanying
proxy pursuant to the rules of the Securities and Exchange Commission, the
persons named as proxies will vote on them in accordance with their best
judgment.
The cost of this solicitation of proxies will be borne by the Company. In
addition to the use of the mail, some of the officers and regular employees of
the Company may solicit proxies by telephone and will request brokerage houses,
banks and other custodians, nominees and fiduciaries to forward soliciting
material to the beneficial owners of Common Stock held of record by such
persons. The Company will reimburse such persons for expenses incurred in
forwarding such soliciting material. It is contemplated that additional
solicitation of proxies will be made in the same manner under the engagement and
direction of D.F. King & Co., Inc., 77 Water Street, New York, NY 10005, at an
anticipated cost of $21,000, plus reimbursement of out-of-pocket expenses.
1999 ANNUAL MEETING
Stockholders wishing to suggest candidates to the Nominating and Corporate
Governance Committee for consideration as directors may submit names and
biographical data to the Secretary of the Company.
The Company's By-Laws prescribe the procedures a stockholder must follow to
nominate directors or to bring other business before stockholder meetings. For a
stockholder to nominate a candidate for director at the 1999 Annual Meeting,
presently anticipated to be held April 29, 1999, notice of the nomination must
be received by the Company between October 20 and November 19, 1998. The notice
must describe various matters regarding the nominee, including name, address,
occupation and shares held. For a stockholder to bring other matters before the
1999 Annual Meeting, notice must be received by the Company within the time
limits described above. The notice must include a description of the proposed
business, the reasons therefor and other specified matters. For a matter to be
included in the Company's proxy statement and proxy for the 1999 Annual Meeting,
notice must be received by the Company on or before November 19, 1998. In each
case, the notice must be given to the Secretary of the Company, whose address is
120 Park Avenue, New York, NY 10017. Any stockholder desiring a copy
of the Company's By-Laws will be furnished one without charge upon written
request to the Secretary.
G. Penn Holsenbeck
VICE PRESIDENT AND SECRETARY
March 19, 1998
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[LOGO]
PHILIP MORRIS
COMPANIES INC.
NOTICE OF
ANNUAL MEETING
OF STOCKHOLDERS
THURSDAY,
APRIL 30, 1998
AND PROXY
STATEMENT
<PAGE>
PHILIP MORRIS COMPANIES INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING APRIL 30, 1998
P
R
O Geoffrey C. Bible and Murray H. Bring, and each of them, are appointed
X attorneys, with power of substitution, to vote, as indicated on the matters
Y set forth on the reverse hereof and in their discretion upon such other
business as may properly come before the meeting, all shares of the
undersigned in Philip Morris Companies Inc. (the "Company") at the annual
meeting of stockholders to be held at the Philip Morris Manufacturing
Center, Richmond, Virginia, April 30, 1998, at 9:00 a.m., and at all
adjournments thereof.
Election of Directors, Nominees:
1. Elizabeth E. Bailey 6. Jane Evans 11. Richard D. Parsons
2. Geoffrey C. Bible 7. Robert E.R. Huntley 12. John S. Reed
3. Murray H. Bring 8. Rupert Murdoch 13. Carlos Slim Helu
4. Harold Brown 9. John D. Nichols 14. Stephen M. Wolf
5. William H. Donaldson 10. Lucio A. Noto
This card also serves to instruct the administrator of the Company's
dividend reinvestment and voluntary cash payment plan and the trustee of
each defined contribution plan sponsored by the Company or any of its
subsidiaries how to vote shares held for a stockholder or employee
participating in any such plan.
SEE REVERSE: IF YOU WISH TO VOTE IN ACCORDANCE WITH -----------------
THE BOARD OF DIRECTORS' RECOMMENDATIONS, JUST SIGN ON SEE REVERSE
THE REVERSE. YOU NEED NOT MARK ANY BOXES. SIDE
-----------------
FOLD AND DETACH PROXY CARD HERE
RETURN PROXY CARD IN ENCLOSED ENVELOPE AFTER COMPLETING, SIGNING AND DATING
[LOGO]
ADMISSION TICKET
- ---------------------------------------
DIRECTIONS
PHILIP MORRIS COMPANIES INC. The Philip Morris Manufacturing
1998 ANNUAL MEETING OF Center is located approximately
STOCKHOLDERS 6 miles south of downtown Richmond.
Thursday, April 30, 1998 Take Interstate 95 to Exit 69
9:00 A.M. (Bells Road). You may request a map
The Philip Morris Manufacturing Center by calling 1-800-367-5415.
3601 Commerce Road
Richmond, Virginia For hotel information in the
Richmond area, please call the
(804) 274-5492 Richmond Convention & Tourism
Bureau at 1-800-370-9004.
- ---------------------------------------
Please present this ticket to the Philip Morris
representative in the Registration Area
- --------------------------------------------------------------------------------
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THIS MEETING, WHETHER OR
NOT YOU ATTEND THE MEETING IN PERSON. TO MAKE SURE YOUR SHARES ARE
REPRESENTED, WE URGE YOU TO COMPLETE AND MAIL THE PROXY CARD ABOVE OR VOTE
YOUR SHARES ELECTRONICALLY OVER THE INTERNET OR BY TELEPHONE.
SEE REVERSE SIDE FOR INSTRUCTIONS ON VOTING YOUR SHARES ELECTRONICALLY OVER
THE INTERNET OR BY TELEPHONE.
<PAGE>
PLEASE MARK YOUR
/X/ VOTES AS IN THIS 0142
EXAMPLE. ----
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS,
FOR THE SELECTION OF AUDITORS AND AGAINST EACH OF THE STOCKHOLDER PROPOSALS.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR:
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of 2. Selection of Auditors / / / / / /
Directors / / / /
(see reverse)
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------
- ------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST:
- ------------------------------------------------------------
FOR AGAINST ABSTAIN
3. Stockholder Proposal No. 1 / / / / / /
FOR AGAINST ABSTAIN
4. Stockholder Proposal No. 2 / / / / / /
- ------------------------------------------------------------
</TABLE>
The signer hereby revokes all proxies heretofore
given by the signer to vote at said meeting or
any adjournments thereof.
NOTE: Please sign exactly as name appears hereon.
Joint owners should each sign. When signing
as attorney, executor, administrator, trustee
or guardian, please give full title as such.
---------------------------------------------------
---------------------------------------------------
SIGNATURE(S) DATE
FOLD AND DETACH PROXY CARD HERE
Philip Morris Companies Inc. encourages you to take advantage of new and
convenient ways by which you can vote your shares. You can vote your shares
electronically over the Internet or by telephone. This eliminates the need to
return the proxy card.
TO VOTE YOUR SHARES ELECTRONICALLY YOU MUST USE THE CONTROL NUMBER PRINTED
IN THE BOX ABOVE JUST BELOW THE PERFORATION. THIS CONTROL NUMBER MUST BE USED
TO ACCESS THE SYSTEM.
TO VOTE OVER THE INTERNET:
[GRAPHIC] - Have this card and your social security number available
- Log on to the Internet and go to the web site
HTTP://WWW.VOTE-BY-NET.COM
TO VOTE BY TELEPHONE:
- Using a touch-tone telephone, U.S. and Canadian stockholders
[GRAPHIC] may dial 1-800-OK2-VOTE (1-800-652-8683) 24 hours a day,
7 days a week. From outside the U.S. or Canada, stockholders
may dial 1-201-324-0377.
If you choose to vote your shares electronically, there is no need for you to
mail your proxy card.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
